Group Life Insurance: Is Your Employer Coverage Enough?

You’ve just landed your dream job. You’re pulling down a fantastic salary and your new job comes with some pretty sweet benefits, too — vacation time, a 401k account, health insurance, and even a group life insurance policy.

Think you’ve got it made? Well, yes and no. The life insurance policy that your employer provides probably isn’t adequate. Read on to find out for sure.

Five Reasons Why Your Employer-Provided Group Life Insurance Isn’t Sufficient

It Isn’t as Much as It Sounds Like

If you are young and single, the payout of a group life insurance policy may sound like a lot of money. The coverage is generally in the range of $25,000 to $50,000 — which would be awfully nice for your parents or other beneficiaries. After all, it’s “free” money, and something is always better than nothing.

Keep in mind, however, that the average cost of a funeral is approximately $11,000, even for a no-frills, plain-pine-box funeral (which doesn’t really exist, anyway).

If your parents, siblings, or other relatives have co-signed an auto loan, mortgage, or student loans for you, they will likely be obliged to pay back the remainder of that debt even after your death. Suddenly, that $25K isn’t stretching quite as far as you thought it would, is it?

There May Be Limits on Your Coverage

Since the group life insurance policies that are available through employers are often considered “guaranteed.” All employees are eligible, and no one is denied. This is a great benefit for some folks, but it also means that you won’t be able to purchase additional coverage through your company.

Your coverage will probably be some multiple of your salary. If you need or want more — say, if you have a large family or want to provide security for your children’s college education — then you’ll need to look into supplemental life insurance. Experts at businesses like Amistad Insurance Services can tell you even more about this option.

You’re Not In Control

What happens if your employer goes out of business? Or simply stops offering the group life coverage altogether? It may not seem likely, but remember that economic downturns can drastically affect a business’s financial standing.

It’s Probably Not Portable…

On the flip side, what if you decide to leave the company? Fewer and fewer employees are climbing the corporate ladder the way people used to. It’s much more likely that you’ll take another position (or several) than that you’ll work for the same company for 50 years and get a gold watch upon your retirement.

Most employer-provided life insurance isn’t portable, meaning that you can’t take it with you. So when you leave the company, your insurance benefits disappear.

…and If It Is, You’ll Pay Big Time

Portable group insurance policies do exist, but you will take over paying the premiums that you employer used to pay. These policies also tend to be more expensive than individual plans. In some cases, you may be able to convert your life insurance from group to individual, but also at a high cost.

In Other Words, You Should Supplement

There’s nothing wrong with employer-provided life insurance, but if you do receive it, learn the details of your coverage. You’ll probably find that it’s a smart financial decision to choose supplemental insurance.

Have questions? Contact experts at your local insurance agency for further guidance.